Lawmakers will have less cash than they expected as they negotiate the final version of the state's two-year budget.

During a state revenue forecast Wednesday, they learned they will have roughly $100 million less to spend due to tax shortfalls and an estimated increase in Medicaid spending.

The governor's office and the Indiana House and Senate each presented versions of the state budget and will now begin negotiating a final draft.

The last version, passed Tuesday by the Senate, proposed spending $34.6 billion over two years. The differences are in the details. All three proposals essentially increase funding for K-12 education and the Department of Child Services while fully funding the Medicaid program.

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Gov. Eric Holcomb delivers the annual State of the State address to the Indiana General Assembly at the Indiana Statehouse in Indianapolis, Tuesday, Jan. 15, 2019.(Photo: Jenna Watson/IndyStar)

The two lead budget writers, Rep. Todd Huston, R-Fishers, and Sen. Ryan Mishler, R-Bremen, both said after the meeting that providing a boost to education funding is their caucus's top priority.

They played their cards close, declining to say whether they would increase or decrease education funding, or any other program, within the budget.

They got some bad news Wednesday. The state's revenue forecast predicts $33.2 million less tax money than anticipated through 2021. That's a big difference from a rosy revenue forecast in December upon which they've been basing their budget assumptions.

Tom Jackson, an economist with IHS Markit, said the federal government shutdown, a slow housing market, a decline in tax refunds, tariffs, and slower consumer spending have impacted the economy. It's still growing, but it's growing slowly. He expects gross domestic product to slow 2.1 percent in 2020 and 1.8 percent in 2021.

In Indiana, corporate tax collections are up as profits soar, according to the report, but the individual income tax collections are increasing less than expected. Wages have been rising steadily at 3.7 percent, according to the report, less than the anticipated 4 percent. Sales taxes, likewise, are generating less than expected.

Meanwhile, Medicaid will need an additional $65.2 million more state revenue through 2021 as enrollment is expected to increase.

Lawmakers indicated they're going to consider the predictions of a slowing economy as they hammer out a budget. Indiana isn't well positioned to weather a recession or downturn.

Jackson said Indiana's economy is overly reliant on manufacturing jobs — at 17.2 percent of total jobs, compared to 8.5 percent nationwide — and that puts the state at risk if the nation slips into recession.